The country’s largest lender increased the interest rate on fixed deposits (FD) for a two- to three-year maturity to 6.50% from 6% a year. Bankers and analysts attributed the reason for the increase in deposit rates to tight banking system liquidity conditions. If you just look at the commercial paper and certificate of deposit rate, you have seen a movement of 100 bps. When banks raise deposit rates, it indicates lending rates will also tighten. When deposit rates were going down, MCLR (marginal cost of funds-based lending rates) fell.

Source: Mint February 28, 2018 10:30 UTC